What a 1040 engagement letter should cover.
Returns covered
State the federal Form 1040 and the state returns included, and the tax year. Say the completed return will be provided for the client's review before anything is filed.
What is excluded
Audit representation, amended returns, and tax planning are separate engagements unless you agree otherwise. Say so in the letter.
Client responsibilities and reliance
The client provides complete, accurate information on time. You rely on it without auditing it, and the client is responsible for its accuracy.
Tax position standards
If a client asks for a position that lacks substantial authority under IRC §6662, the letter says you will advise them of that, and that you will not prepare a return reflecting a position you have advised is improper.
Foreign financial accounts
The letter notifies the client of their obligation to disclose foreign financial accounts and the penalties for failing to report them.
Fee, confidentiality, and the rest
The fee and when it is due, confidentiality under IRC §7216, a limit on liability tied to fees paid, mediation before litigation, termination on written notice, and record retention.
Generate the letter in minutes.
Choose Individual Income Tax Return, enter the client name, the fee, and payment terms. Use the scope notes field for anything non-standard, such as rental income or itemized deductions, and the excluded services field for anything outside the return. EngageDraft generates a letter that covers the sections above, designed around AICPA guidelines.
Review the output. Edit anything that needs adjusting. Send for e-signature. Your client signs from their device. The signed record is stored in your dashboard.
Sample 1040 engagement letter
This is a complete engagement letter generated by EngageDraft for an individual tax return. Firm, preparer, and client names below are placeholders; the scope, terms, and structure match real output for this engagement type.
Download this sample as a Word document (.docx). No signup required.
Dear Avery Quinn,
This letter confirms the terms under which Cedarline Tax & Advisory, led by Riley Marsh, CPA, will provide professional tax preparation services to you for the 2025 tax year. This letter constitutes a mutual agreement between you and the firm, and it is intended to define the scope of work, your responsibilities, and the terms governing the engagement. The services covered by this engagement are listed below:
- Preparation of your 2025 Individual Income Tax Return
The deliverable for this engagement is your completed federal and applicable state income tax return, which will be provided to you electronically for your review prior to filing.
Scope of Services
Individual Income Tax Return
This engagement covers the preparation of your 2025 federal Form 1040 and any applicable state income tax returns. The preparation will account for your W-2 wage income, rental property income and expenses on Schedule E, and either the standard deduction or itemized deductions on Schedule A, whichever is more appropriate based on the information you provide. Your completed returns will be provided to you electronically for your review and approval before any filing takes place.
This engagement does not include audit representation, preparation of amended returns, or tax planning and advisory services. If any of those services become necessary, they would require a separate engagement and a separate agreement.
Services Not Covered by This Engagement
The following services are expressly excluded from this engagement and are not part of the scope of work described in this letter:
- Audit representation before the IRS or any state tax authority
- Preparation of amended returns for any prior or current tax year
Client Responsibilities
You are responsible for providing complete, accurate, and timely information and documentation necessary to prepare your returns. Riley Marsh, CPA will rely on the information you provide and will not independently audit, verify, or otherwise confirm the accuracy of that information. By proceeding with this engagement, you accept full responsibility for the accuracy and completeness of all information submitted for use in preparing your returns. If information provided is later found to be incomplete or inaccurate, additional fees may apply to correct the work.
Regarding tax positions, if you request that a position be taken on your return that does not meet the standard of having substantial authority under IRC §6662, you will be advised of that fact before the return is filed. Riley Marsh, CPA will not recommend a position that lacks a reasonable basis and will not prepare a return that reflects a position you have been advised is improper.
If you have a financial interest in or signature authority over any foreign financial account, you are required to disclose that information as part of this engagement. Failure to report foreign financial accounts may result in substantial civil and criminal penalties under the Bank Secrecy Act and the Report of Foreign Bank and Financial Accounts requirements. It is your responsibility to inform the preparer of any such accounts so that any required disclosures can be addressed appropriately.
Fees and Payment
The agreed fee for the services described in this letter is $450, due upon signing this engagement letter. Work on your return will begin upon receipt of your signed agreement and your documentation. If your account becomes past due, work on your engagement may be paused until payment arrangements are resolved. The fee for this engagement is not contingent on the outcome of your return, the amount of any refund, or any other result of the services rendered.
Confidentiality
All information you share with Cedarline Tax & Advisory in connection with this engagement will be kept strictly confidential in accordance with IRC §7216, applicable state law, and applicable professional standards. Your information will not be disclosed to any third party without your consent, except as may be required by law or professional standards. This commitment to confidentiality extends to any data stored or processed through third-party technology platforms used in the delivery of services to you.
Limitation of Liability
The liability of Cedarline Tax & Advisory and Riley Marsh, CPA to you for any cause of action arising out of or related to this engagement is limited to the total fees you paid for the specific services giving rise to the claim. The firm is not liable for any consequential, indirect, or punitive damages of any kind, regardless of the form of action or the theory under which a claim is brought. This limitation applies to the fullest extent permitted by applicable law.
This sample was generated by EngageDraft, including its limitation of liability paragraph. It is a starting point, not legal advice, and has not been reviewed by an attorney. Confirm with your own counsel before use.
Dispute Resolution
If a dispute arises between you and Cedarline Tax & Advisory in connection with this engagement, both parties agree to submit the dispute to mediation before either party initiates litigation. Mediation will be conducted in the firm's jurisdiction under the rules of a mediator mutually agreed upon by both parties. Both parties agree to participate in the mediation process in good faith before pursuing any other legal remedy.
Termination
Either party may terminate this engagement at any time upon written notice to the other party. Fees for all work completed up to the date of termination will be due and payable at that time. Upon receipt of payment for completed work, the firm will return any original documents you provided. Cedarline Tax & Advisory will retain all engagement documentation for a period of seven years following the termination or completion of this engagement, in accordance with professional standards.
Agreement
Please review this letter carefully. By signing this engagement letter, you confirm that you have had the opportunity to read and understand all of its terms, that you have had the chance to ask any questions before signing, and that you agree to the terms and conditions set forth in this letter. Your signature indicates your acceptance of this engagement on the terms described above.
Frequently asked questions
What should a 1040 engagement letter include?
At a minimum, the returns and tax year covered, what is excluded, what the client must provide, the fee and when it is due, and how the engagement ends. The sample on this page also covers tax position standards, foreign financial account disclosure, confidentiality, a limit on liability, and mediation before litigation.
Do I need an engagement letter for every individual client?
The AICPA recommends engagement letters for tax preparation services, and requirements vary by state board, so check yours. Even where a letter is not required, it is your record of the scope and fee the client agreed to before work began.
Can I reuse last year's 1040 engagement letter?
Yes, if the scope and fee have not changed. Update the tax year, the client details, and the fee, and re-read the exclusions. In EngageDraft you can save an approved letter as a template and reuse it without rewriting it.
What does a 1040 engagement letter say about foreign accounts?
It tells the client they must disclose any financial interest in or signature authority over a foreign financial account, and that failing to report one can bring substantial civil and criminal penalties. The sample letter on this page includes that paragraph.
What does a 1040 engagement letter say about tax positions?
It says that if the client asks for a position that lacks substantial authority under IRC §6662, the preparer will advise them of that, and will not prepare a return reflecting a position the preparer has advised is improper.